4 Steps to Making Information Technology a Profit Center

11 January, 2013

In the past, Information Technology, or IT, has been viewed by many businesses as a necessary evil. IT has received a bad name in many cases by it own doing. Expensive licensing, upgrades, incompatible systems, over budget implementation costs have made IT look like the company villain.  

Nowadays IT is being viewed as the next business profit center.  With low cost hardware and software solutions many small businesses can realize immediate gains from implementing the proper IT infrastructure. When done the right way IT can be relied upon to increase profits year after year.  With the efficiency of personal phone and internet devices, employees are no longer afraid of new technology. This can result in faster implementation times and reduce training costs as even older employees are now enjoying computer and internet technology in their lives. These skills can be leveraged by the business owner to keep the business lean and efficient.

But how do you develop and IT Strategy?

In this article we are going to review 4 steps that will help you transform your existing IT systems into a profit center.

These steps are; inputs, processes, outputs, and outcomes.

Step #1 Inputs

Inputs can be defined by three areas: external environment, corporate strategy; and resources

External environment refers to what information is coming into the business? In this respect we view any and all information as contributing to sales and marketing opportunities so it is important to review all information from purchase orders, invoices, product information, quotations, sales orders, supplier and customer data as important.  In addition what information is provided from sales and service people? This can seem to be a very overwhelming task and many organizations stop at this stage as the process seems too difficult to manage or you need a room full of servers to handle all of the information. That is not your concern at the moment. We are just defining all the information coming into the business.

Once the information has been identified, now we concern ourselves with the corporate strategy, structure and systems. We review the incoming information and determine based on our corporate strategy what priority and importance it is assigned. Questions such as how much customer information do we need? Information can be acquired by different people at different times so we may need to have a client file that is accessed by many and can be modified on an ongoing basis. For example, upon initial contact with a new client we may obtain basic business information over the phone or fax. Once a salesperson or service person visits the client more technical details of the client can be obtained and updated into the clients file such as technical data or comments made by the client. This new information can help sales and service so the files can be updated and viewed to enhance customer service levels.

Once the information we require that is aligned with our corporate strategy has been determined, we can then review technical structure and resources. It could be determined to outsource the data back up and day to day running of an IT system, from servers to laptops. Cloud computing and software as a service has become popular with businesses to reduce costs and maintain data security.

At this point it is always important to know the outcome in terms of business efficiencies or ROI. As part of the implementation we should identify basic efficiencies, such as increased productivity, labor savings, time savings, etc.

In addition it can be an advantage to expect and budget on going efficiencies. It is no longer a necessary evil but can be a money making venture along with sales and service.

Establishing a corporate culture of IT can be a money making enterprise is critical to the strategy so IT can be expected to create gains for the organization going forward. 

Step # 2 – Processes

Processes refer to the elements of the strategy and how they will be executed. Elements such as the IT strategy, physical IT structure, and putting together the IT systems all fall under this process. There must be an established leadership plan before any expenditures are made.  Who is going to have responsibility to implement the process and getting things completed? How much responsibility in terms of money spent and system design does this person require? Servers and software must be installed as well as security firewalls established to protect data. The outsourcing and resource decisions made in step one is now implemented here in step two.

Step # 3 – Outputs

Outputs refer to the results of the implementation of the IT strategy and structure.

Tangible and measurable outputs must be realized to be successful.

What are the immediate productivity gains from staged implementation of the IT strategy? Is there a reduced lead time on orders? Are you shipping orders faster and with fewer errors? Are you invoicing faster to allow for increased cash flow?

More importantly how do these benefits affect your channel partners and customers?

With better order tracing, do you realize a better customer retention level? Do you see an increase in orders from channel partners as they see your investment in IT as a benefit to providing increased customer service to their customers?

Step # 4 – Outcomes

Outcomes are the affect the results have on corporate profitability or (return on Investment)

The information harnessed from a powerful IT strategy can be turned directly into the profitability of the corporation.  The ability to understand your clients and partners directly enhancing customer loyalty and can increase the order be existing customer with a minimal increase in cost of sales. The ability to reduce mistakes and correct any mistakes quickly due to the IT strategy also enhances the bottom line.

With technology developing at an amazing pace and the relatively low cost of hardware and software solutions, IT is the next frontier for corporate profits. Small changes in IT systems can be leveraged into large profits. IT can now be viewed as a money making business unit instead of a necessary expense.

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